TOKYO (Reuters) - A Japanese state-backed fund and Sharp’s (6753.T) lenders are likely to agree on a new rescue plan worth around 650 billion yen ($5.5 billion) for the struggling display maker by next weekend, sources with direct knowledge of the matter said on Friday.

The plan would represent the third bailout in as many years for Sharp which must also weigh a proposal from Apple supplier Foxconn (2317.TW). The state-backed fund, Innovation Network Corporation of Japan, is widely seen as the frontrunner to rescue Sharp as the government would like to keep its technology in Japanese hands.

INCJ is offering to invest 300 billion yen in Sharp, while banks were expected to offer up to 350 billion yen in financing including 150 billion yen in a debt-for-equity swap, the sources told Reuters.

Taiwan’s Foxconn, formally known as Hon Hai Precision Industry Co, has offered over 600 billion yen for Sharp but has not yet proposed any detailed restructuring plan for the company, the sources said, requesting anonymity because they were not authorised to talk to the media.

INCJ is planning to later merge Sharp’s LCD business with rival Japan Display (6740.T), in which it is the top shareholder, the sources added.

The fund’s top executives are expected to meet next week to confirm its participation in the bailout plan. Sharp’s lenders also want to give Foxconn an opportunity to offer a more detailed proposal, the sources said.

Other sources have said INCJ is also looking at a merger of Sharp’s household appliances business with that of Toshiba Corp (6502.T), which is eager to bolster its finances in the wake of an accounting scandal.